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ANNUAL REPORT
FOR THE YEAR 2005
Ludwig Institute for Cancer Research
A Statement by the Founder
In creating this organization I have been guided
by certain principles which throughout my life I
have found to be highly effective. Success in any
complex enterprise consists in bringing the best
minds to bear on each problem, in providing the
best resources possible, and in putting each
concept into practice whenever and wherever the
opportunities are most favorable. I believe firmly
in the value of applying these principles in
grappling with tasks as momentous as finding
ways to relieve the human suffering caused by
cancer.
Why should this undertaking be international? I am persuaded that eventual mastery of
The rare vision and ability needed in the battle cancer will come only from intense and
against cancer are not limited by frontiers, and the unremitting scientific exploration over
scientists who possess these gifts must be sought many decades. This should not be hindered
wherever they are to be found. Nor does cancer by the changing policies of governments
reveal itself in the same guise in every nation, but and the vagaries of public interest.
strikes different populations in different forms. Accordingly it is my intention that the
Yet despite the growing necessity for concerted Institute shall be so structured as to ensure
worldwide effort, I find no agency, which has secure and continuing support for the
both the truly international scope and the attainment of its aims.
substantial resources, which I deem essential for a
comprehensive attack on human cancer. The elimination of cancer will surely rank
as one of man’s greatest and
In my judgment the ultimate conquest of this uncontroversial achievements. That day
frightful disease is not yet in sight, and the same may be long delayed. How long we cannot
view is held by most informed physicians and tell. But I do not doubt that it will surely
scientists in bio-medical research. In contrast to come.
those who would yield to undue optimism, and
who hope for too much from present programs,
D. K. Ludwig
December 17, 1974
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Ludwig Institute for Cancer Research
Contents
Annual Report for the Year 2005
A Statement by the Founder ............................................................................................................i
Registered Address, Officers, Directors of Offices .......................................................................1
Board of Directors ...........................................................................................................................2
- Audit Committee .........................................................................................................................2
- Budget & Finance Committee ....................................................................................................2
- Compensation Committee...........................................................................................................2
- Executive Committee...................................................................................................................2
Scientific Committee........................................................................................................................2
Offices ...............................................................................................................................................3
Research Branches...........................................................................................................................3
Aims and Principles .........................................................................................................................5
Legal status .......................................................................................................................................5
Statutes..............................................................................................................................................5
Organization and Investments........................................................................................................5
Scientific Report...............................................................................................................................6
Statutory Financial Statements 2005 ...........................................................................................15
Consolidated Financial Statements 2005 .....................................................................................25
Performance Report ......................................................................................................................40
Proposal to carry forward excess of income over expenditure..................................................45
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Ludwig Institute for Cancer Research
Registered Address, Officers,
Directors of Offices
(as of 31 December 2005)
Registered Address Stadelhoferstrasse 22
8001 Zurich, Switzerland
Postal address Postfach
8024 Zurich, Switzerland
Telephone [41] 044 267 6262
Fax [41] 044 267 6200
President Mr. Edward A. McDermott Jnr.
Institute Director Dr. Lloyd J. Old
Associate Director, Clinical Investigation Dr. George D. Demetri
Associate Director, Intellectual Property and Dr. Jonathan Skipper
Technology Licensing
Associate Director, Laboratory Investigations Dr. Richard Kolodner
Associate Director, Programs Dr. Andrew Simpson
Chief Financial Officer Mr. Richard D. J. Walker
Director, Office of Academic Review Dr. Ellen Puré
Director, Office of Clinical Trials Management Dr. Eric W. Hoffman
Director, Office of Communications Dr. Sarah White
Director, Office of Information Technology Dr. C. Victor Jongeneel
Director, Office of Intellectual Property Dr. Jonathan Skipper
Counsel Milbank, Tweed, Hadley & McCloy LLP,
New York
Niederer Kraft & Frey, Zurich
Auditors KPMG Fides Peat, Zurich
Principal Bankers Credit Suisse, Zurich
National Westminster Bank PLC, London
HSBC Bank USA, New York
Custodian Bank Boston Safe Deposit & Trust Co., Boston
Company registration numbers
Switzerland CH-020.3.916.330-2
Australia A.R.B.N. 001 379 344
Belgium BE 0418.853.522
United Kingdom FC007198
United States of America EIN 23-712 1131
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Ludwig Institute for Cancer Research
Board of Directors Mr. R. Palmer Baker Jnr., Chairman
Mr. Alfred Berger
Mr. Georges-André Cuendet
Mr. Olivier Dunant
Mr. John D. Gordan III
Dr. Adolf E. Kammerer
Mr. Pierre Languetin
Mr. Edward A. McDermott Jnr.
Dr. Lloyd J. Old
Sir Derek Roberts
Prof. Jane Royston
Secretary to the Board
Mr. Richard D.J. Walker
- Audit Committee Mr. Georges-André Cuendet, Chairman
Mr. John D. Gordan III
Dr. Adolf E. Kammerer
Mr. Pierre Languetin
- Budget & Finance Committee Sir Derek Roberts, Chairman
Dr. Adolf E. Kammerer
Prof. Jane Royston
- Compensation Committee Mr. Olivier Dunant, Chairman
Mr. Alfred Berger
Sir Derek Roberts
Prof. Jane Royston
- Executive Committee Mr. John D. Gordan III, Chairman
Dr Adolf E. Kammerer
Mr. Edward A. McDermott Jnr.
Scientific Committee Dr. Lloyd J. Old, Chairman
Dr. Douglas T. Fearon
Dr. Samuel Hellman
Dr. George Klein
Dr. Lucille Shapiro
Dr. Phillip Sharp
Dr. Harald zur Hausen
Secretary to the Scientific Committee
Dr. A Munro Neville
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Ludwig Institute for Cancer Research
Offices
Zurich Registered Office
Stadelhoferstrasse 22
8001 Zurich
Switzerland
Postal Address
Postfach
8024 Zurich
Switzerland
Telephone: [41] 044 267 6262
Email: postmaster@licr.ch
New York Head-Office
605 Third Avenue
New York, NY 10158
United States of America
Telephone: [1] 212 450 1500
London Office of Intellectual Property
Horatio House
5th Floor South
77-85 Fulham Palace Road
London W6 8JC
United Kingdom
Telephone: [44] 020 8735 9240
Lausanne Office of Information Technology
Quartier Sorge
Bâtiment Génopode
1015 Lausanne
Switzerland
Telephone: [41] 021 692 4060
Research Branches
Brussels Avenue Hippocrate 74, UCL 7459
1200 Brussels
Belgium
Telephone: [32] 02 764 7459
Lausanne Chemin des Boveresses 155
1066 Épalinges
Switzerland
Telephone: [41] 021 692 5966
London - Royal Free and Courtauld Building
University College Medical School 91 Riding House Street
London W1W 7BS
United Kingdom
Telephone: [44] 020 7878 4000
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Ludwig Institute for Cancer Research
Research Branches Cont'd
London - St. Mary=s Imperial College School of Medicine
(to August 2005) St. Mary=s Campus
Norfolk Place
London W2 1PG
United Kingdom
Telephone: [44] 020 7724 5522
Melbourne P.O. Box 2008
Royal Melbourne Hospital
Victoria 3050
Australia
Telephone: [61] 03 9341 3155
New York Memorial Sloan-Kettering
Cancer Center
Box 32
1275 York Avenue
New York, NY 10021-6007
United States of America
Telephone: [1] 212 639 8600
San Diego University of California San Diego
9500 Gilman Drive
La Jolla, CA 92093-0660
United States of America
Telephone: [1] 858 552 4920
Sao Paulo Rua Prof. Antonio Prudente 109 -
4 andar
Liberdade
01509-010 - Sao Paulo, SP
Brazil
Telephone: [55] 011 3388 3200
Stockholm Box 240
171 77 Stockholm
Sweden
Telephone: [46] 08 524 871 00
Uppsala Box 595
751 24 Uppsala
Sweden
Telephone: [46] 018 16 0400
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Ludwig Institute for Cancer Research
Aims and Principles Legal status
The purpose of the Institute is to originate and The Institute was incorporated in 1971 in
conduct incisive long-range research programs, to Zurich, Switzerland as a not-for-profit
be carried out on a continuing basis in conjunction corporation. Based on its present activities,
with hospitals in established medical centers, the Institute is exempt from direct taxes on
directed to the ultimate goal of eradicating cancer. income and capital gains in all territories in
It is neither the province nor the intention of the which it operates.
Institute to award grants for the conduct of
research by others, - in fact its charter precludes
this. Rather, substantially all research financed by Statutes
the Institute is carried out by the Institute itself
through its own appointed research staff or The activities of the Institute are governed
through laboratory and clinical collaborations by its Statutes. The exclusively charitable
involving Institute research staff and outside purpose contained therein is for the Institute
academic investigators. The research staff of the to engage itself directly in continuous active
Institute are organized in Branches. Nine are in conduct of medical research, especially in
operation - one in Australia; one in Belgium; one the field of cancer. This research is to be for
in Brazil; one in Switzerland; two in Sweden; one the benefit of the public and carried out in
in the United Kingdom and two in the United conjunction with hospitals which provide
States of America. Each Branch is focused on a medical care and are organized and
program of research defined by the Branch operated exclusively for charitable
Director in relation to the overall objectives of the purposes.
Institute. The Branches are established in
association with University Hospitals to facilitate Organization and Investments
close collaboration between laboratory and
clinical scientists and to provide the clinical The Institute’s Endowment is held for its
resources required for Ludwig Institute programs. benefit by a separate legal entity, LICR
The Branches are staffed so that Branch Directors Fund, Inc. ("the Fund"), a not-for-profit
can address complex biological problems related Delaware, USA corporation. The Fund was
to cancer with a critical mass of interactive established exclusively to further the
scientists having expertise in several scientific charitable and scientific purposes of the
disciplines. Branch staffs vary in size from 20 to Ludwig Institute by receiving, holding and
155. The Institute employs around 900 scientists, investing funds on behalf of, and remitting
clinicians and support personnel worldwide. funds to the Institute. The Fund is a
Support of the Branches’ research is principally membership corporation with no authority
provided by the Institute and supplemented with to issue capital stock. The Board of
governmental and other grants. Since its inception Directors of the Institute are the Members
the Ludwig Institute has expended over CHF 1.9 of the Fund and constitute the Board of
billion on medical research and for 2005 had a Directors of the Fund.
total annual budget, financed by Institute funds, of
CHF 87.4 million. The Endowment held by the Fund is
invested on its behalf by investment
managers appointed by the Board of
Directors and Fund management.
Substantially all of the investment
instruments are held by the Custodian Bank
in the name of the Fund. Income and
principal of funds of the Fund can only be
applied to the Ludwig Institute.
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Ludwig Institute for Cancer Research
Scientific Report
In the 34 years since the Ludwig Institute for Cancer Research (LICR) was founded, it has grown to
become the largest international non-profit institute dedicated to the fight against cancer. The research
of the Institute is carried out at research Branches in seven countries around the world, and also in
cooperation with an international network of affiliated scientists and clinicians. This organizational
structure maximizes the Institute’s opportunities to interact with a broad range of different laboratory
and clinical environments, and facilitates the worldwide engagement of outstanding scientists.
The research orientation of each LICR Branch is defined by the Branch Director in the context of the
overall objectives of the Institute. Each Branch is staffed to enable it to address complex biological
problems related to cancer, and provide a critical mass of scientists with expertise in relevant scientific
disciplines. Branches have formal associations with University Hospitals, which allows not only a
close interaction between laboratory and clinical scientists, but also the provision of clinical resources
required for basic research and LICR’s early-phase clinical trials.
The quality of research conducted by LICR scientists is monitored on an ongoing basis by the LICR
Scientific Directorate and Scientific Advisory Committee, and is independently assessed through
external peer-review processes. A commitment to programmatic-based research has resulted in the
establishment of numerous collaborations between Branches and Affiliates, individual investigators
who are experts in fields that complement LICR’s research objectives. LICR also benefits from
affiliations, through The James R. Kerr Program, with investigators in Brazil, China, Russia, South
Africa, Turkey, and Ukraine; countries that are scientifically talented but have fewer opportunities for
international collaboration in advanced cancer research. All of these activities extend the Institute's
global opportunities for cancer research, in accordance with the wishes of its founder, Mr. Daniel K.
Ludwig.
The following scientific progress report summarizes examples of LICR’s research, based on studies
published in 2005 by LICR Branch staff members and Affiliates.
Genetics Discipline
Carcinogenesis disrupts important cell processes, for example migration, growth or apoptosis
(programmed cell death). These processes control, and are controlled by, the ‘expression’ of genes -
the ‘transcription’ of DNA into RNA, which is in turn ‘translated’ into a protein. The regulation of
transcription is a critical first step in the control of gene expression necessary for all cellular
processes. Examining how transcription is regulated is important to elucidate fundamental cell
biology, and also to understand how cell processes are corrupted by and/or contribute to cancer.
Research areas in the discipline of Genetics include: Cancer Genetics (Gene Discovery &
Characterization and Transcription Regulation), Cancer Genomics (Genome Annotation and Gene
Expression Profiling) and Cancer Epidemiology (Human Papillomavirus & Cancer).
Transcription Regulation
Transcription is regulated by complex interactions between ‘transcription factors’, which bind to the
‘promoter’ sequence at the beginning of each gene, and proteins that bind to regulatory ‘enhancer’,
‘repressor’ and/or ‘insulator’ sequences in the genome. These regulatory sequences define the
combinatorial codes that direct and specify gene expression patterns. Identification and
characterization of these regulatory sequences are vital to understanding the complex patterns or
‘profiles’ of gene expression and elucidating the molecular basis of cancer. The following several
studies illustrate some of the work published by LICR investigators in 2005 in the area of
Transcription Regulation.
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Ludwig Institute for Cancer Research
A team from the San Diego Branch reported the development of an efficient, new method to identify
thousands of regulatory sequences. This whole genome promoter mapping approach marks a major
advance in decoding regulatory networks in the human genome. The study was conducted with a
commercial partner and is part of a competitive National Human Genome Research Institute (USA)
initiative, ‘The ENCODE Project: ENCyclopedia of DNA Elements.
The Sterol Regulatory Element Binding Proteins (SREBP) family of transcription factors regulates
genes involved in the synthesis of lipids, which are required for, amongst other things, the formation
of cell membranes. LICR scientists from the Uppsala Branch analyzed the expression of key genes
involved in lipid metabolism, and found that SREBP-mediated transcription was regulated during the
cell cycle as a result of specific modifications of the SREBP proteins. The team also showed that the
SREBP family is itself regulated by the SCFFbw7 protein, which has been shown to control several
other proteins vital for cell cycle control, and also to be inactivated in cancers of the breast,
endometrium, ovary and colon. The evidence supports the hypothesis that deregulation of lipid
synthesis facilitates the growth and proliferation of cancer cells. The research also suggested that
SCFFbw7 and its interaction with SREBPs may be an attractive target for developing new cholesterol-
lowering therapies for the fight against cardiovascular disease.
Research from the Stockholm Branch was featured on the cover of Nature Neuroscience in August,
2005. The stunning image showed fluorescent-labeled transcription factors in the spinal cord of an
embryonic chick. The team discovered that Sox21 inhibits the Sox1-3 transcription factors that
prevent the differentiation of neural cells. The balance of Sox21/Sox1-3 determines whether neural
cells remain as precursors or differentiate into neurons. It is highly plausible that the mechanism
governing neural stem cell differentiation has parallels in cancer stem cell differentiation.
Biochemistry Discipline
Cells interact with their environment by sending and receiving signals that initiate and terminate
cellular processes such as cell division, growth, differentiation, migration and survival. External
signals activate receptors on the cell surface, which in turn activate intracellular signal transduction
cascades that regulate cellular processes. Cancer cells have abnormal signal generation and reception,
which allow them to grow out of control, escape apoptosis, and invade other tissues. Research areas in
the discipline of Biochemistry center largely on Signal Transduction and include: Receptor Kinases
and Phosphatases, Non-Receptor Kinases and Phosphatases, Receptor Transcription Factors, and
Cytokines.
Signal Transduction - Myeloproliferative Diseases
Hematopoiesis is the formation of blood cells, and disruptions to this process can result in
myeloproliferative disesases such as leukemia (abnormal proliferation of white blood cells),
polycythemia vera (PV, excessive production of red blood cells), and thrombocytosis (excessive
production of platelets). A group of signaling factors critical in hematopoiesis are the cytokines,
which regulate cell growth and differentiation by binding to cell surface receptors that signal through
the Janus kinases (JAKs) to activate the STAT family of transcription factors. The receptor
transcription factor, Notch, has also been implicated previously in disturbances in hematopoiesis. The
following studies illustrate briefly LICR publications on biochemistry research in the context of
myeloproliferative diseases.
The interleukin-6 (IL-6) cytokine family binds to the gp130 receptor to regulate cellular responses
during hematopoiesis. Investigators from the Melbourne Branch found, in a mouse model, that
mutated gp130 resulted in hyperactivation of STAT1 and STAT3 and caused a broad spectrum of
hematopoietic abnormalities. The team showed that gp130-dependent STAT3, but not STAT1,
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Ludwig Institute for Cancer Research
hyperactivity is responsible for thrombocytosis, and enlargement of the spleen and lymph nodes in
mice.
Scientists from the Brussels Branch were part of a collaborative study that identified a Janus Kinase 2
(JAK2) mutation as being the principal cause of PV. JAK2 was originally discovered at the
Melbourne Branch in 1992. It has subsequently been shown to play crucial roles in signal
transduction, via cytokine, G protein-coupled and tyrosine kinase growth factor receptors, in
mammalian development, physiology and disease. The mutation discovered by the Brussels team and
their collaborators constitutively activated JAK2, and is found in other myeloproliferative disorders.
Subsequently, the LICR investigators showed that the homologous mutations in two other JAKs,
JAK1 and Tyk2, led to constitutive activation of STAT3, STAT5 and several other signaling pathways
implicated in cancer. These results suggest that JAK1 and Tyk2 are potential oncogenes, and should
be investigated in various human cancers.
Finally, conventional thinking has been that Jagged1, a ligand for Notch receptors, was critical for
renewal of the hematopoietic stem cells (HSC) from which blood and immune cells are formed.
However a team from the Lausanne Branch showed that inactivating the jagged1 gene in bone
marrow does not impair HSC self-renewal. These data have thus confounded the paradigm that
Jagged1-dependent Notch signaling is essential for hematopoiesis.
Cell Biology Discipline
Research in Cell Biology examines how the function and structure of the cell is affected by the
disruption of cellular processes by cancer. Research areas in the discipline of Cell Biology include:
Angiogenesis and Lymphangiogenesis; Cell Migration and Metastasis (Rho GTPases and Cell
Polarity); Cell Cycle and Apoptosis (Cell Cycle and Apoptosis, and Genome Integrity).
Cell Cycle Checkpoints and Cancer
Genome integrity and cell growth and division are tightly regulated by cell cycle checkpoints that
must be disrupted for tumor development and progression to occur. Many of the known oncogenes,
such as p53, the function of which is lost in >50% of cancers, are part of checkpoint protein
complexes. Many current cancer therapies, particularly chemotherapies, act by blocking the division
of cells that are rapidly cycling, cancerous or not, which frequently result in side effects.
Understanding the cell cycle may give clues for the design of new, cancer-specific therapies.
The p53 family of transcription factors (p53, p63 and p73), detects DNA damage during G1 and
responds by halting the cell cycle and initiating apoptosis (programmed cell death). Investigators at
the University College London Branch found that E2F1, a member of the transcription factor family
regulating the expression of multiple cell cycle control proteins, stimulates the apoptotic function of
p53, but not p63 and p73. This is the first demonstration of p53 activity being regulated during the cell
cycle by E2F/p53 interactions. The University College London team is also characterizing the ASPP
protein family, which was discovered at the Branch and activates p53-mediated apoptosis. The team
showed that both ASPP1 and ASPP2 are transcriptional targets of the E2F family, providing a
mechanism by which E2F cooperates with p53 to induce apoptosis. The aim of this research is to
explore the therapeutic potential of re-activating p53 function to cause apoptosis of cancer cells.
Cell cycle progression in the G1 and S phases is controlled by cyclin-dependent kinases (cdk) that are
positively regulated by cyclins and negatively regulated by two families of cdk inhibitors, cip/kip and
ink4. The expression levels of cdks are fairly constant, but they must be complexed with cyclins, the
expression levels of which rise and fall as the cell cycle progresses, to be active. For example, cylin
E/cdk2 kinase activity is important in G1, while the ‘S phase promoting factor’ includes the cyclin
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Ludwig Institute for Cancer Research
A/cdk2 complex. In 2005, a team from the Uppsala Branch found that all members of the TGFβ
super-family (see p8-9, ‘TGFβ Program’) can inhibit epithelial cell growth by inducing the expression
of p21cip1 to inhibit cyclin E/cdk2 kinase activity. Meanwhile, a team of investigators from the
University College London Branch and the James R. Kerr Program in Xi’an, China, showed that the
binding of different cyclins and cdks to p27kip1, which also inhibits cyclin E/cdk2 kinase activity, is
dependent on the posttranslational modification of p27kip1. Understanding the regulation of p21cip1 and
p27kip1 may provide new strategies to inhibit cancer cell growth through reactivation of the growth
inhibitory activities of these proteins.
The ‘mitotic spindle’ is a network of microtubules that connect the kinetochore, at the centromere of
the chromosome, to the centrosome, which separates chromosome pairs. The mitotic checkpoint halts
cell cycle progression when even one chromosome has not properly attached to the mitotic spindle,
thus ensuring that all chromosomes are divided equally between daughter cells. Scientists at the San
Diego Branch have been investigating the mitotic checkpoint and the disruptions that cause
aneuploidy, an abnormal number of chromosomes, which is a characteristic of cancer cells. The team
identified the protein complex, ZW10-Rod, as the bridge between the kinetochore and the Mad1-Mad-
2 heterodimer that forms the checkpoint’s actual ‘wait’ signal. ZW10 recruits the Mad1-Mad2
complex to unattached kinetochores and then removes the complex after kinetochore attachment to the
centromere. ZW10, Mad1 and Mad2 have all been shown to be mutated in colorectal cancers with
gross aneuploidy.
The centromeric protein CENP-A is the foundation for the assembly of kinetochores, and its
misregulation has been reported in colorectal cancers. Research by investigators at the San Diego
Branch have found a surprising CENP-A independent mechanism that is responsible for segregating
holocentric chromosomes in C. elegans meiosis. Further studies of this adaptation should provide
insight into the mechanisms by which chromosomes are connected to the spindle apparatus and
segregated during cell division. The San Diego Branch teams also focused on the characterization of
the kinetochore proteins, CENP-E and CENP-F, finding that CENP-E is responsible for appropriately
silencing the mitotic checkpoint ‘wait’ signal and that CENP-F is essential for efficient assembly of a
stable microtubule-kinetochore interface.
Mitotic checkpoint breakdown results in a phenotype of chromosomal instability (CIN), which
involves changes in chromosome number (aneuploidy) or structure, and is seen in several hereditary
cancer predisposition syndromes. However understanding the CIN phenotype has been complicated
by the complexity of systematically organizing and characterizing the multiplicity of different genome
rearrangements. Investigators from the San Diego Branch analyzed the phenotypes of different yeast
mutations to correlate particular classes of genome rearrangements with disruptions in mechanistic
pathways such as DNA recombination, telomerase activity or cell cycle checkpoints. Parallels
revealed by the comparison of the yeast genome rearrangement classes with 47800 human cancer
karyotypes suggests that genome rearrangements in human cancers might provide information about
human carcinogenesis and which genes are best candidates for mutation screening in cancer.
Immunology Discipline
The immune system has a remarkable capacity for fending off infectious diseases, and it has become
clear that these same defenses can recognize and destroy cancer cells. LICR is working on treatment
strategies, such as targeted antibodies and cancer vaccines, which harness the body’s immune system
to more effectively and specifically fight cancer cells. An understanding of the role of the immune
system in cancer development and the development of cancer therapies based on immunologic
principles continue to be major objectives of LICR, which is, arguably, the largest academic center in
the world for cancer immunology studies. Programs in the discipline of Immunology include: Cancer
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Ludwig Institute for Cancer Research
Vaccine (Characterization of Human Immune Response, and Vaccine Constitution and Development);
Cellular and Molecular Immunology (Adaptive Immune Response, and Innate Immune Response);
Cancer Antigen Discovery (Cancer Antigen Identification, and Cancer Antigen Characterization); and
Antibody Targeting (Antibody Characterization, and Antibody Engineering).
Antibody Targeting Program - The 806 Antibody
Antibody-based therapies have long been an interest at LICR. Antibodies that target signaling
molecules promoting cancer cell growth currently represent one of the most promising areas in the
development of new treatments for cancer. Pharmaceutical companies have recently brought to
market several antibody therapies that effectively benefit patients by targeting the epidermal growth
factor receptor (EGFR) (cetuximab), vascular endothelial growth factor (bevacizumab) or
hematopoietic differentiation antigens (rituximab). Mutations or overexpression of EGFR are linked
to over 50% of all cancers of epithelial cell origin, which makes this a very promising target for novel
cancer therapies.
Some ten years ago, a collaboration between the San Diego and New York Branches was formed
specifically to generate antibodies that target a mutant variant of EGFR, de2-7 EGFR (ΔEGFR, or
EGFR variant III). The de2-7 EGFR mutant is found mostly in glioblastoma, a cancer that is
intractable to virtually all conventional treatments, and is an excellent candidate for antibody targeting
given that the variant is on the cell surface and is structurally distinct from normal, or ‘wild-type’,
EGFR (wtEGFR). In the characterization process, one of those anti- de2-7 EGFR antibodies, 806, was
found to also bind a subset of wtEGFR molecules, but only when the molecule was over-expressed, as
in the case on many forms of carcinoma. The distinct affinity of 806 for de2-7 EGFR and
overexpressed wtEGFR, but not wtEGFR on normal tissue, makes this antibody unique, with less
likelihood to cause toxic side-effects when used clinically and with the potential to have a far greater
therapeutic index than other available agents that attach less selectively to all forms of EGFR. LICR’s
Antibody Targeting Program has been investigating the 806 antibody in preclinical and clinical
studies to assess its potential as a highly-specific anti-EGFR therapy. The original 806 was generated
as a mouse antibody that may be immunogenic, i.e. cause the human immune system to react against
the antibody therapy and clear it from the blood. Thus the mouse antibody was re-engineered by a
team from the Melbourne Branch and Affiliates in Homburg (Germany) to enable production of a
chimeric antibody, ch806, appropriate for early-phase clinical trials.
LICR investigators have taken advantage of the unique binding specificity of 806 to further unravel
the complexities of EGFR activation and its hyper-activity in cancer. In back-to-back Journal of
Biological Chemistry papers, a team from the Melbourne and New York Branches discovered that
EGFR exposes the epitope (binding site) for 806 as it transits from an inactive, tethered form to an
active, ligand-bound form. This was a major advance in our understanding of conformational epitopes
in growth factors and revealed the structural basis for the specificity of 806. The team also
demonstrated that although EGFR can be untethered on the cell surface, ligand binding is still required
for the receptor to become active. Also, a team from the Melbourne and New York Branches and
Affiliates from New Haven (USA) demonstrated that over-expression of EGFR leads to the
accumulation of under-glycosylated EGFR in the cell’s endoplasmic reticulum. Unexpectedly, this
immature form of the receptor was also detected at the cell surface. Since under-glycosylated EGFR is
primed for activation, it may contribute to spontaneous receptor activity and cancer cell growth. This
body of work furthers our understanding of the activation and conformation of EGFR and also
presents two new approaches to generating potential anti-tumor antibodies with reduced targeting of
normal tissues; the generation of antibodies specific to receptors in their transitional state or specific
to immature receptors.
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Ludwig Institute for Cancer Research
The treatment of human tumor xenografts in mice by research teams from the Melbourne, New York
and San Diego Branches have shown that 806 has anti-tumor activity against glioma and against
tumors with overexpressed EGFR. Further preclinical studies showed that combining 806 with a
second form of anti-EGFR antibody or with a tyrosine kinase inhibitor specific to the EGFR results in
additive and, in some cases, synergistic anti-tumor activity.
The first clinical trial of ch806 was initiated in 2005 at the LICR Melbourne Branch. The trial is
testing the safety of ch806 in patients with carcinomas that express de2-7 EGFR or overexpress
wtEGFR.
The James R Kerr Program
The James R. Kerr Program was established to honor the memory of Mr. James R. Kerr, a trusted
friend and colleague of Mr. Daniel K. Ludwig. Through the wisdom of Mr. Kerr who served as
Chairman of the Board of LICR from 1984 until 1995, LICR has the administrative structure and
financial-base required to fulfill its obligation as a global cancer research organization. The James R.
Kerr Program, led by Dr. Andrew J.G. Simpson, continues to establish international collaborations
with leading scientific investigators throughout the world in order to develop and strengthen the global
network of cancer research conducted by LICR. Currently, the James R. Kerr Program consists of
collaborative research projects at leading academic centers in Brazil, China, Russia, South Africa,
Turkey and Ukraine.
In 2005, the James R. Kerr Program focused on its strength in bioinformatics in order to further
develop a cancer/testis (CT) database originally created by LICR investigators and located via the
Cancer Immunity online journal (www.cancerimmunity.org). In July 2005, leading bioinformaticians
from the James R. Kerr Program from Russia, Brazil and South Africa met with experts from the CT
field at the Moscow Conference on Computational Molecular Biology at Moscow State University to
create a more comprehensive tool for investigating CT antigens.
Monoclonal antibody development continues to be a focus of the James R. Kerr Program. Resources
from the Program have been used to produce recombinant proteins corresponding to some of the
cancer target antigens newly identified at LICR. These recombinant proteins were subsequently used
to produce monoclonal antibodies against those cancer target antigens. Researchers at the LICR
Monoclonal Antibody Core Facility located in Xi’an, China, have worked on collaborative projects to
develop novel reagents for potential therapeutic use. Additionally, James R. Kerr investigators from
Ukraine have collaborated with LICR researchers to develop monoclonal antibodies as part of the
collaborative research of the LICR TGF-β Program.
Clinical Trials
LICR believes that human benefit from laboratory research is derived most efficiently when early
clinical studies are conducted to verify and explore these discoveries in the human setting. Based on
this principle, LICR assesses the therapeutic utility of its research discoveries by sponsoring and
conducting its own early phase proof-of-concept clinical trials. The global LICR Phase I and II
clinical trials are coordinated centrally by the Office of Clinical Trials Management in New York.
LICR initiated 10 early-phase clinical trials in 2005, bringing the total number of active LICR
sponsored trials to 33. The clinical trials used expertise and reagents generated primarily through the
Antibody Targeting and Cancer Vaccine Programs.
- 11 -
Ludwig Institute for Cancer Research
Clinical Trial Sites
The following LICR Clinical Trial Centers had active trials in 2005:
Asia
- Mie University School of Medicine, Mie, Japan
- Okayama University Medical School, Okayama, Japan
- Osaka University Graduate School of Medicine, Osaka, Japan
Australasia
- Austin Health (LICR Melbourne Branch), Melbourne, Australia
Europe
- Centre Hospitalier Universitaire Vaudois (LICR Lausanne Branch), Lausanne, Switzerland
- Clinique Universitaires Saint-Luc (LICR Brussels Branch), Brussels, Belgium
- Krankenhaus Nordwest, Frankfurt, Germany
- University Hospital Nijmegen, Nijmegen, Netherlands
- University Hospital Zürich, Zürich, Switzerland
- University of Saarland Medical School, Homburg, Germany
North America
- M.D. Anderson Cancer Center, Houston, USA
- Memorial Sloan-Kettering Cancer Center (LICR New York Branch), New York, USA
- Roswell Park Cancer Institute, Buffalo, USA
- Weill Medical College of Cornell University, New York, USA
- New York University Clinical Cancer Center, New York, USA
Biological Production Facilities
Investigational agents for use in human clinical trials must meet extensive standardization and quality
control criteria. These “current Good Manufacturing Practices” (cGMP), extensive testing, and
secure and monitored storage conditions ensure the safety of investigational agents and compliance
with regulatory and licensing requirements. To translate discoveries rapidly and effectively into
investigational agents for clinical trials, facilities that perform these functions must be able to meet
these high standards.
The Cornell University/LICR BPF at Ithaca, New York utilizes bacterial and yeast expression systems
to produce proteins, including NY-ESO-1, SSX2, MAGE-3 and Melan A, all of which are required for
LICR’s clinical vaccine program.
These proteins are then transferred to the LICR facility in Melbourne which serves as the testing,
storage, documentation and distribution center for all LICR investigational agents.
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Ludwig Institute for Cancer Research
Intellectual Property Program
To ensure that the Institute is able to capitalize on its discoveries, a vigorous patent protection policy
has been pursued. In 2005, 14 patents were issued, 17 patents published and 25 new patent
applications filed in the United States of America Patent and Trademark Office (PTO). A further 9
patents were issued and 22 patents published by the European patent Office (EPO) and a further 31
new international patent (PCT) applications were published by the World Intellectual Property
Organization (WIPO). Most of these patents are related to growth factors, cytokines, signaling
molecules, antibodies and human tumor antigens.
The research efforts of the LICR have resulted in a series of unique scientific discoveries, leading to
the establishment of a significant intellectual property portfolio. As an example, the Institute’s
Antigen Discovery Program underlies several other LICR Programs, including the Antibody
Targeting, Bioinformatics, Genomics, and Cancer Vaccine Programs. Intense endeavors are now
underway to bring these discoveries to the attention of the pharmaceutical and biotechnology
industries as new candidates for licensing and to further the development of these potential cancer
therapies.
Academic Matters
During 2005, LICR investigators published in excess of 360 papers in peer-reviewed journals.
The quality of the Institute’s science continued to be internationally recognized. In the last year, the
following distinctions and awards were received:
• Dr. Thomas Perlmann (Stockholm Branch) was elected to the 50-member Nobel Assembly
responsible for electing the Nobel Prize laureates in Physiology or Medicine;
• Dr. Benoît Van den Eynde (Brussels Branch) was awarded the honor of presenting a cycle of
conferences for the Francqui Chair, Louvain University, Brussels;
• Dr. Antony Burgess (Melbourne Branch) was awarded the Leach Lecture Medal;
• Dr. Serhiy Souchelnytskyi (Uppsala Branch) was awarded a Roche Award by the Human
Proteome Organization (HuPO) Conference.
Formal academic review to assess the quality and impact of the research performed by LICR staff
members was conducted in 2005 by the Scientific Advisory Committee and Scientific Directorate.
Three staff members underwent external review for Associate Member rank and were promoted:-
Dr. Stefan Constantinescu (Brussels Branch), Dr. Weisan Chen (Melbourne Branch) and Dr. Ian
Davis (Melbourne Branch).
One staff member, Dr. Andrew Clayton (Melbourne Branch) underwent review for Assistant Member
rank and was appointed.
One staff member, Dr. Karen Arden (San Diego Branch) underwent review for Senior Investigator
rank and was appointed.
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Ludwig Institute for Cancer Research
One staff member, Dr. Brian Stevenson (Office of Information Technology Lausanne) underwent
view for Associate Investigator rank and was appointed.
Three staff members underwent review for Assistant Investigator rank and were appointed:-
Dr. Christian Iseli (Office of Information Technology Lausanne), Dr. Zhanqi Liu (Melbourne Branch)
and Dr. Carina Hellberg (Uppsala Branch).
- 14 -
Ludwig Institute for Cancer Research
Statutory Financial Statements 2005
Ludwig Institute for Cancer Research,
Zurich
Report of the Statutory Auditors
to the General Meeting
Financial Statements 2005
KPMG Fides Peat
Zurich, April 7, 2006
Ref. M. Herzog
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Ludwig Institute for Cancer Research
- 16 -
Ludwig Institute for Cancer Research
Balance sheet
as at December 31, 2005
USD CHF
2005 2004 2005 2004
Assets
Current assets
Liquid funds (Note 1.b) 9,609,169 7,799,507 12,663,919 8,868,847
Fixed term deposits (Note 1.b) 9,071,954 8,215,670 11,955,941 9,342,203
Other receivables -
third parties 2,211,928 1,386,224 2,915,098 1,576,292
external funding 3,755,254 4,059,294 4,949,061 4,615,859
Prepayments and accrued i ncome 1,802,751 2,503,926 2,375,847 2,847,226
Total curre nt as s e ts 26,451,056 23,964,621 34,859,866 27,250,427
Fixed assets
Financial fixed assets -
Investments (Note 4) 5,108,060 5,103,853 6,731,912 5,803,590
Other financial fixed assets 912,505 984,304 1,202,593 1,119,250
Total fixed assets 6,020,565 6,088,157 7,934,505 6,922,840
Total assets 32,471,621 30,052,778 42,794,371 34,173,267
Liabilities and net worth
Current liabilities
Accounts payable - third parties 7,142,739 8,952,117 9,413,427 10,179,504
Accruals 8,748,897 6,855,022 11,530,181 7,794,911
Deferred Income 4,681,344 4,432,136 6,169,523 5,039,865
Total curre nt liabilitie s 20,572,980 20,239,275 27,113,131 23,014,280
Total liabilities 20,572,980 20,239,275 27,113,131 23,014,280
Net worth
Share capital (Note 1e) 33,722 33,722 50,000 50,000
Legal reserve (Note 1e) 6,744 6,744 10,000 10,000
Cumulative exchange adjustment (Note 1e) 5,061 12,300 0 0
Excess of income over expenditure (Note 3) 11,853,114 9,760,737 15,621,240 11,098,987
Net worth 11,898,641 9,813,503 15,681,240 11,158,987
Total liabilities and net worth 32,471,621 30,052,778 42,794,371 34,173,267
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Ludwig Institute for Cancer Research
Statement of income and expenditure
for the year ended December 31, 2005
USD CHF
2005 2004 2005 2004
Income (Note 1.c)
Contributions and dividends 72,496,825 67,471,451 88,325,215 86,128,845
Interest 660,091 487,124 817,180 616,462
External funding (Note 9) 26,562,490 23,806,364 32,883,927 30,127,117
License fees and patent royalties (Note 2) 4,925,492 4,975,633 6,097,686 6,296,639
Other Income 182,290 112,596 225,669 142,492
Total Income 104,827,188 96,853,168 128,349,677 123,311,555
Medical research and related expenditure
Salaries & social benefits 54,622,134 52,871,733 67,621,580 66,909,383
Laboratory 13,788,990 13,974,647 17,070,600 17,684,995
Equipment & other assets (Note 1.f) 4,388,642 4,420,699 5,433,082 5,594,426
Leasehold improvements (Note 1.f) 316,824 494,639 392,214 625,969
Clinical trials 2,421,774 2,628,706 2,998,113 3,326,637
Collaborative research programs 5,642,717 5,238,889 6,985,649 6,629,795
Occupancy 7,466,751 7,217,607 9,243,822 9,133,879
Travel 842,962 806,096 1,043,583 1,020,114
Scientific conferences, seminars etc. 1,110,235 1,037,155 1,374,456 1,312,531
Consultants 2,151,193 2,280,469 2,663,173 2,885,932
Patent costs 2,769,989 3,452,880 3,429,231 4,369,609
Other operating expenses 5,955,397 4,215,708 7,372,756 5,334,991
Total expenditure 101,477,608 98,639,228 125,628,259 124,828,261
Excess of income over expenditure / (expenditure over income) 3,349,580 (1,786,060) 2,721,418 (1,516,706)
before other items
Other items
Net gain / (loss) on foreign exchange (Note 1.e) (1,257,203) 663,209 1,800,835 (845,178)
Excess of income over expenditure / (expenditure over income)
for the year 2,092,377 (1,122,851) 4,522,253 (2,361,884)
Excess of income over expenditure at beginning of year 9,760,737 10,883,588 11,098,987 13,460,871
Excess of income over expenditure at end of year 11,853,114 9,760,737 15,621,240 11,098,987
- 18 -
Ludwig Institute for Cancer Research
Notes to Financial Statements – December 31, 2005
1 Accounting policies
1.a Basis of preparation
These financial statements have been prepared in accordance with the provisions of the Swiss
Code of Obligations.
1.b Liquid funds and fixed term deposits
Cash on hand and at banks and funds on call available within 48 hours are classified as liquid
funds. Cash deposits fixed for periods of longer than 48 hours are classified as fixed term
deposits.
1.c Income
Contributions and dividends are accounted for on the cash basis.
Interest is accounted for on the accruals basis.
External funding received from any outside source, whether of cash or a non-cash nature, is
recorded in the Institute’s books of account upon receipt. External funding received is taken to
income when the corresponding expenditure is incurred. Any unspent income is deferred to
future accounting periods. External funding pledged, but not received where expenditure has
been incurred, is taken to account as income and is accounted for as receivable pending
receipt.
License fees and royalties are accounted for on the modified cash basis.
1.d Joint ventures
The Institute has entered into joint ventures to carry out research projects on a joint basis with
affiliated hospitals and research institutions. Income received and expenditure incurred under
joint ventures is accounted for by the method of proportional consolidation.
1.e Translation of foreign exchange transactions
The Institute’s Zurich and Lausanne offices’ Swiss franc transactions and the Lausanne
Branch’s operations are recorded in Swiss francs. Those of the Brussels, London St. Mary’s,
London University College, Melbourne, New York, San Diego, Sao Paulo, Stockholm and
Uppsala Branches are recorded in the currencies of their respective countries. The foreign
branch accounts and the Zurich, New York, London and Lausanne offices’ transactions in
currencies other than Swiss francs are translated for the purpose of preparing statutory
financial statements of the Institute as a whole into Swiss francs in accordance with the
following principles: -
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Ludwig Institute for Cancer Research
i. Income – contributions and dividends at the monthly rates as published by the Swiss
VAT authorities. All other income is translated at the yearly average of the monthly
rates as published by the Swiss VAT authorities.
ii. Expenditure – at the yearly average of the monthly rates as published by the Swiss
VAT authorities.
iii. Assets and liabilities – at the rates ruling at the end of the respective year.
Where foreign exchange contracts are entered into for the purpose of hedging future
commitments, any net gains are deferred whilst provision is made for any net losses arising
thereon.
The USD equivalents of the statutory financial statements in CHF are presented in accordance
with the same principles as stated above and in addition share capital, legal reserve and the
balance of income at the beginning of the year are translated at historical rates.
The resulting translation adjustments are included in the excess of income over expenditure for
the year.
1.f Tangible fixed assets
Expenditure on equipment and other assets and leasehold improvements is charged in full
against revenue in the year it is incurred.
2 License fees and royalties
License fees and royalties are shown net of co-owners’ share of income.
USD CHF
Description 2005 2004 2005 2004
Gross license fees and royalties 7,634,190 7,650,994 9,451,054 9,682,308
Co-owners’ shares distributed 2,708,698 2,675,361 3,353,368 3,385,669
Net license fee and royalties income 4,925,492 4,975,633 6,097,686 6,296,639
3 Excess of income over expenditure
The Statutes of the Institute stipulate that the excess of income over expenditure shall not be
distributed to shareholders and accordingly the Board of Directors proposes that the available
excess of income over expenditure of CHF 15,621,240 (USD 11,853,114) at December 31,
2005 be carried forward.
- 20 -
Ludwig Institute for Cancer Research
4 Investments
USD CHF
Description 2005 2004 2005 2004
Universe Tankships, Inc.
Investment 5,103,000 5,103,000 6,725,244 5,802,621
Interest in capital 100% 100% 100% 100%
Dividends paid to Institute 0 0 0 0
PIramed Ltd
Investment 756 845 996 960
Interest in capital 8% 8% 8% 8%
Dividends paid to Institute 0 0 0 0
XCellSyz Ltd
Investment 7 8 9 9
Interest in capital 1% 1% 1% 1%
Dividends paid to Institute 0 0 0 0
Lymphatix Ltd
Investment 4,297 0 5,663 0
Interest in capital 36% 0% 36% 0%
Dividends paid to Institute 0 0 0 0
Total Investments 5,108,060 5,103,853 6,731,912 5,803,590
As part of a licensing arrangement, in 2005 the Institute acquired a 36.43% interest in the
company Lymphatix Ltd, a Finnish corporation. The relevant shares are valued at the
acquisition costs of EUR 3,643 (CHF 5,663, USD 4,297).
5 Fire insurance values
USD CHF
Description 2005 2004 2005 2004
Equipment and other assets 80,534,065 78,078,418 106,135,844 88,782,969
Leasehold improvements 34,792,202 31,500,226 45,852,643 35,818,907
Tangible fixed assets 115,326,267 109,578,644 151,988,487 124,601,876
- 21 -
Ludwig Institute for Cancer Research
6 Liabilities to pension funds
USD CHF
Description 2005 2004 2005 2004
Current liabilities 32,093 167,323 42,295 190,263
Branches and offices with defined contribution schemes are located in Belgium, Brazil,
Sweden, Switzerland and the United States of America. The branches in Australia and the
United Kingdom are registered employers with the local university pension schemes, which set
the level of contributions based on the advice of the schemes’ actuaries. In view of the size of
the schemes and the Institute’s limited participation in the management of the schemes, the
two university schemes are treated as defined contribution schemes. The contributions are
calculated as a percentage of the insured salary.
Institute wide, the annual cost of the employer’s contributions in 2005 and 2004 for all plans
amounted to CHF 5,782,791 (USD 4,671,075) and CHF 6,096,280 (USD 4,817,290)
respectively.
From 2002, a second pension scheme in the United Kingdom, the Federated Pension Scheme
(FPS), has been accounted for as a defined benefit scheme in accordance with Swiss GAAP
FER 16. The scheme’s pension liabilities are set out in the following table: -
USD CHF
Description 2005 2004 2005 2004
Value of funded obligations 9,025,218 8,443,720 11,894,334 9,601,354
Market value of the scheme’s assets 8,942,811 8,148,056 11,785,731 9,265,154
Shortfall 82,407 295,664 108,603 336,200
(Excess provision) (343,359) (99,835) (452,522) (113,519)
Provision for funded obligations 425,766 395,499 561,125 449,719
This provision of CHF 561,125 (USD 425,766) has been accounted for in the balance sheet
under “Accruals”.
The total cost for the FPS defined benefit plan in 2005 amounted to CHF 412,102 (USD
332,877), being the cost of contributions 2005 of CHF 316,476 (USD 255,635) and the
amortization cost of the shortfall 2005 of CHF 95,626 (USD 77,242).
In 2004 total costs for the FPS defined benefit plan were CHF 429,280 (USD 339,218), being
the cost of contributions 2004 of 365,003 (USD 288,426) and the amortization cost of the
shortfall 2004 of CHF 64,277 (USD 50,792).
- 22 -
Ludwig Institute for Cancer Research
The underlying actuarial assumptions, used in the calculation are based on current economic
circumstances and tax exemption status, are as follows: -
Description 2005 2004
Discount rate 4.90% 5.35%
Expected rate of return 7.00% 6.60%
Annual increase of future salaries 3.50% 3.60%
An actuarial valuation is carried out triennially and in addition a valuation in accordance with
Swiss GAAP FER 16 is carried out annually.
No surplus of scheme assets has been capitalized in the balance sheet.
7 Lease commitments
USD CHF
Description 2005 2004 2005 2004
Lease commitments not recorded
in the balance sheet 24,457,957 24,967,361 32,233,132 28,390,437
8 Value added tax
The Institute is registered for value added tax in Switzerland.
In September 2004, the Federal Tax Administration carried out an audit at the Institute’s
Zurich office. In an informal report, the Federal Tax Administration questioned the method
used by the Institute in calculating the reduction of the input tax for the years 2000 to 2004.
The report set out three different methods to calculate the input tax reduction with claims
ranging for 2003 - the year audited in detail - between CHF 889,937 (USD 782,637) and CHF
929,802 (USD 817,696).
In May 2005 the Federal Tax Administration revised their initial position and invoiced the
Institute for a total amount of CHF 1,739,606 (USD 1,319,983) with amounts ranging between
CHF 301,866 (USD 229,051) and CHF 374,404 (USD 284,091) for the years 2000 to 2004.
The Institute’s management continues to be not in agreement with these calculations and its tax
advisors wrote to the Federal Tax Administration in June 2005 setting out again the Institute’s
position. The Federal Tax Administration has not, as yet, responded to this letter.
In the opinion of management, based on professional advice received, the Institute expects a
further substantial reduction in the claim by the Federal Tax Administration. However, taking
account of the developments that took place in 2005, for the sake of prudence, an accrual of
CHF 1,205,000 (USD 914,333) has been included in the financial statements 2005, whereas no
accrual was made in 2004.
- 23 -
Ludwig Institute for Cancer Research
9 External funding
The Institute receives external funding from third parties including government agencies, in
return for which the Institute may be obliged to comply with specific conditions. In certain
cases, the right and / or obligation exists to confirm compliance by means of audit. The Board
of Directors does not expect that these arrangements will result in any significant adverse
financial consequences for the Institute.
10 Related party transactions
The Institute effectively controls LICR Fund Inc. (the “Fund”), a non-profit membership
corporation incorporated in Delaware, USA, which was established to receive, hold and invest
funds on behalf of the Institute.
During 2005 and 2004 the Fund was a material source of funding and made grants of CHF
84,982,672 (USD 69,796,825) and CHF 82,999,429 (USD 64,996,451) respectively.
Effective January 1, 1996, the Institute entered into an administrative service agreement with
The Ludwig Group Inc. (LGI), a wholly owned subsidiary of Universe Tankships Inc.,
Delaware, USA.
Fees paid by the Institute New York office under the service agreement including occupancy
related costs amounted to CHF 1.8 Mio (USD 1.4 Mio) in 2005 and CHF 1.9 Mio (USD 1.5
Mio) in 2004.
Payables in favor of LGI by the Institute New York office as at December 31, 2005 and
December 31, 2004 amounted to CHF 472,673 (USD 358,656) and CHF 429,143 (USD
377,401).
- 24 -
Ludwig Institute for Cancer Research
Consolidated Financial Statements 2005
Ludwig Institute for Cancer Research,
Zurich
Report of the Group Auditors
to the General Meeting
Consolidated Financial Statements 2005
KPMG Fides Peat
Zurich, April 7, 2006
Ref. M. Herzog
- 25 -
Ludwig Institute for Cancer Research
- 26 -
Ludwig Institute for Cancer Research
Consolidated Balance Sheet
as at December 31, 2005
USD CHF
2005 2004 2005 2004
Assets
Current assets
Liquid funds (Note 2) 9,686,221 7,821,731 12,765,466 8,894,118
Short-term cash deposits (Note 2) 9,071,954 8,215,670 11,955,941 9,342,203
Investments (Notes 2 & 3) 1,180,306,389 1,170,212,327 1,555,525,790 1,330,648,437
Collateral under securities loan agreement (Note 4) 91,580,608 58,731,799 120,694,083 66,783,929
Interest & dividends receivable 2,989,338 3,085,354 3,939,649 3,508,357
Research external funding receivables (Note 2) 3,755,254 4,059,294 4,949,061 4,615,859
Other receivables - third parties 2,387,772 1,509,616 3,146,843 1,716,601
Prepayments 1,789,703 2,482,247 2,358,651 2,822,574
Total current assets 1,301,567,239 1,256,118,038 1,715,335,484 1,428,332,078
Fixed assets
Financial fixed assets -
Investments (Notes 1 & 5) 28,871,060 28,122,853 38,049,170 31,978,495
Other financial fixed assets 912,505 984,304 1,202,593 1,119,250
Total fixed assets 29,783,565 29,107,157 39,251,763 33,097,745
Total assets 1,331,350,804 1,285,225,195 1,754,587,247 1,461,429,823
Liabilities and net worth
Current liabilities
Creditors - third parties 8,900,808 10,791,272 11,730,386 12,270,807
Payables under securities loan agreement (Note 4) 91,580,608 58,731,799 120,694,083 66,783,929
Accruals (Note 13) 8,323,131 6,855,022 10,969,056 7,794,911
Deferred income (Notes 2 & 6) 4,681,344 4,432,136 6,169,523 5,039,865
Total current liabilities 113,485,891 80,810,229 149,563,048 91,889,512
Total liabilities 113,485,891 80,810,229 149,563,048 91,889,512
Net worth
Share capital (Note 6) 33,722 33,722 50,000 50,000
Legal reserve (Note 6) 6,744 6,744 10,000 10,000
Endowments (Notes 1 & 6) 572,000,000 572,000,000 773,352,000 773,352,000
Cumulative excess of income over expenditure per statement attached (Note 6) 645,819,191 632,362,005 840,599,999 820,548,288
Cumulative translation adjustment (Notes 1 & 6) 5,256 12,495 (8,987,800) (224,419,977)
Net worth 1,217,864,913 1,204,414,966 1,605,024,199 1,369,540,311
Total liabilities and net worth 1,331,350,804 1,285,225,195 1,754,587,247 1,461,429,823
- 27 -
Ludwig Institute for Cancer Research
Consolidated Statement of Income and Expenditure
for the year ended December 31, 2005
USD CHF
2005 2004 2005 2004
Investment income
Interest 8,883,601 9,704,600 10,997,885 12,281,178
Dividends 7,863,299 5,953,879 9,734,764 7,534,634
Earnings from short term investments and other investment income 118,574 158,316 146,795 200,349
Income from securities lending (Note 4) 300,327 173,045 371,805 218,988
Total investment income 17,165,801 15,989,840 21,251,249 20,235,149
Other gains from investment activities
Net realised gains on investment transactions (Notes 2 & 3) 86,192,693 64,174,820 106,706,554 81,213,235
Net unrealised (depreciation) / appreciation of investments (Notes 2 & 3) (14,299,542) 72,875,187 (17,702,833) 92,223,549
Unrealised foreign exchange (losses) / gains (Note 2) (1,386,205) 667,068 1,923,639 (856,759)
Net gain of unconsolidated subsidiary (Note 5) 744,000 99,000 921,072 125,285
Total other gains from investment activities 71,250,946 137,816,075 91,848,432 172,705,310
Expenditure related to investment activities
Management, custodian & other fees 7,751,170 7,333,878 9,595,948 9,281,023
Administration expenses 655,823 589,091 811,909 745,495
Total expenditure related to investment activities 8,406,993 7,922,969 10,407,857 10,026,518
Net gain from investment activities 80,009,754 145,882,946 102,691,824 182,913,941
Medical research related income
Research external funding (Notes 2 & 6) 26,910,371 24,317,880 33,887,258 30,334,390
License fees and royalties 4,925,492 4,975,633 6,097,686 6,296,639
Contributions 2,700,000 2,475,000 3,342,543 3,129,416
Other 182,290 112,596 225,669 142,492
Total medical research related income 34,718,153 31,881,109 43,553,156 39,902,937
Medical research related expenditure
Salaries & social benefits 54,622,134 52,871,733 67,621,580 66,909,383
Laboratory expenditure 13,788,990 13,974,647 17,070,600 17,684,995
Equipment & other assets (Note 2) 4,388,642 4,420,699 5,433,082 5,594,426
Leasehold improvements (Note 2) 316,824 494,639 392,214 625,969
Other 27,904,922 26,877,510 34,546,135 34,013,488
Total medical research related expenditure 101,021,512 98,639,228 125,063,611 124,828,261
Excess of income over expenditure
Excess of income over expenditure for year 13,706,394 79,124,827 21,181,369 97,988,617
Excess of income over expenditure at beginning of year 632,362,005 553,752,553 820,548,288 722,755,363
Net increase in restricted funds (Note 6) (249,208) (515,375) (1,129,658) (195,692)
Excess of income over expenditure at end of year 645,819,191 632,362,005 840,599,999 820,548,288
- 28 -
Ludwig Institute for Cancer Research
Consolidated Statement of Cash Flows
for the year ended December 31, 2005
USD CHF
2005 2004 2005 2004
Operating activities
Medical research related income 34,718,153 31,881,109 43,553,156 39,902,937
Medical research related expenditure (101,021,512) (98,639,228) (125,063,611) (124,828,261)
Excess of operating expenditure over income (66,303,359) (66,758,119) (81,510,455) (84,925,324)
Net change in receivables and payables relating to operations (89,960) (243,216) (111,370) (307,790)
Net cash used by operating activities (66,393,319) (67,001,335) (81,621,825) (85,233,114)
Investing activities
Net gain from investment activities 80,009,754 145,882,946 102,691,824 182,913,941
Net realised gain on investment transactions (86,192,693) (64,174,820) (106,706,554) (81,213,235)
Net unrealised depreciation / (appreciation) of investments 14,299,542 (72,875,187) 17,702,833 (92,223,549)
Net unrealised loss / (gain) on forward foreign currency contracts 1,196,594 (79,939) 1,481,383 (101,163)
Net gain of unconsolidated subsidiary (Note 5) (744,000) (99,000) (921,072) (125,285)
Net change in receivables and payables relating to investing activities (46,153) 1,967,468 (57,137) 2,489,831
Purchase / acquisition of securities (1,101,333,737) (1,273,649,693) (1,363,451,166) (1,611,803,686)
Proceeds from sale / disposal of securities 1,163,128,619 1,328,942,227 1,439,953,230 1,681,776,388
Effects of exchange movements (1,203,833) 84,193 (2,586,430) 680,542
Net cash generated by investing activities 69,114,093 65,998,195 88,106,911 82,393,784
Net increase / (decline) in liquid funds and cash deposits 2,720,774 (1,003,140) 6,485,086 (2,839,330)
Liquid funds and cash deposits at beginning of year 16,037,401 17,040,541 18,236,321 21,075,651
Liquid funds and cash deposits at end of year 18,758,175 16,037,401 24,721,407 18,236,321
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Ludwig Institute for Cancer Research
Notes to the Consolidated Financial Statements
as at December 31, 2005
1 Accounting principles and scope of consolidation
Basis of presentation
The accompanying consolidated financial statements of the Ludwig Institute for Cancer Research are presented in
accordance with generally accepted accounting principles in Switzerland (Financial Reporting Standards – Swiss
GAAP FER). As from the year 2003 the accounting standard FER 21 has been adopted.
Scope of consolidation
These consolidated financial statements include the Ludwig Institute for Cancer Research (the “Institute”), a non-
profit organization incorporated in Switzerland and LICR Fund Inc. (the “Fund”), a non-profit membership
corporation incorporated in Delaware, U.S.A. which was established to receive, hold and invest funds on behalf of
the Institute and which is effectively controlled by the Institute. The consolidation is based on the audited
financial statements of the Institute and the Fund. All inter-company transactions and balances have been
eliminated and no minority interests exist.
Universe Tankships Inc. (UTI), a wholly owned subsidiary of the Institute, which is not managed by the Institute
on a unified basis, has been accounted for using the equity method.
Nature of operations
The Institute carries out its scientific and clinical activities at its branches in conjunction with hospitals in
university medical centers. The Institute's research branches are situated in Brussels, Lausanne, London (St.
Mary's [closed Aug 2005] and University College), Melbourne, New York, San Diego, Sao Paulo, Stockholm and
Uppsala. In addition, administrative offices are maintained in Lausanne, London, New York and Zurich. The
Institute has a broadly based research program that addresses the challenge of cancer using the disciplines of
biochemistry, cell biology, genetics, immunology, molecular biology and virology.
Foreign currency translation
CHF financial statements
The consolidated accounts presented in CHF include the Institute's financial statements denominated in CHF and
the Fund's financial statements denominated in USD. Translation of the Fund's Balance Sheet into CHF is
achieved by using the exchange rate prevailing at year-end with the exception of endowments and accumulated
earnings, which are translated at historical rates. The Fund's income and expenditure are translated at the average
rate existing during the year. The resulting translation difference is shown as a separate component of equity. The
currency translation adjustment, which arises on the translation of the Fund's USD based financial statements into
CHF is being accumulated with effect from January 1, 1994 and has not been calculated retrospectively.
USD financial statements
The consolidated accounts presented in USD include the Institute's financial statements denominated in USD and
the Fund's financial statements denominated in USD. As the Institute has historically maintained USD accounts
in addition to its CHF accounts, there is no need to perform a translation for the purposes of preparing a
consolidation in USD. Accordingly, there is no translation effect in the consolidated USD accounts apart from
share capital and legal reserve. The share capital and legal reserve are translated into USD at the rate ruling on
January 1, 1994, being the initial year in which consolidated financial statements were prepared. The resulting
translation difference is shown as a separate component of net worth.
Foreign exchange differences, which arise from foreign exchange in preparing the Institute's USD accounts, are
included on a yearly basis in the excess of income over expenditure for the year.
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Ludwig Institute for Cancer Research
2 Accounting policies
Liquid funds and short-term cash investments
Cash at banks and funds on call available within 48 hours are classified as liquid funds. Cash deposits fixed for
periods of longer than 48 hours are classified as short-term cash investments.
Investments and related income
Investments are valued at the last reported sales price for the year, as quoted on major securities exchanges.
Securities that are not traded on major securities exchanges are valued based on quotations received from leading
brokers. Forward foreign currency contracts are valued based on the average of closing bid and asked quotations
from banks and brokers. Investments in limited partnerships are valued based on the Fund’s underlying holding in
these partnerships, which represent market values as determined by the general partners of the partnership.
Unrealized appreciation and depreciation on investments as at the year-end are included in the excess of income
over expenditure for the year.
Securities transactions are recorded on the trade date. Realized gains and losses from security transactions are
calculated on the average cost basis.
Foreign exchange transactions
Assets and liabilities denominated in foreign currencies are translated into the reporting currencies at the closing
rate of exchange at year-end. Income and expenditure denominated in foreign currencies are translated into the
reporting currencies on the following basis: -
i) Dividend income and contributions are translated at the average monthly rates as published by the Swiss
tax authorities of the month in which the dividends and contributions have been received.
ii) Research expenditure and research external funding income are translated at the yearly average rates of
the monthly rates as published by the Swiss tax authorities.
iii) Purchases and sales of investments securities are translated at the rates of exchange prevailing on the
respective dates of such transactions.
iv) All other income and expenditure are translated at the yearly average rates of the monthly rates as
published by the Swiss VAT authorities.
Net realized and unrealized foreign exchange differences include gains and losses on foreign currency positions
and changes in the value of other assets and liabilities arising as a result of changes in exchange rates.
Research external funding
External funding received from any outside source, whether of a cash or a non-cash nature, is recorded in the
Institute's books of account upon receipt. External funding received (in terms of restricted funds) is taken to
income when the corresponding expenditure is incurred. Any unspent restricted funds are deferred to future
accounting periods. Unrestricted funds received are taken to income in the year of receipt. External funding
pledged, but not received where expenditure has been incurred, is taken to account as income and is accounted for
as receivable pending receipt.
Joint ventures
The Institute has entered into joint ventures with affiliated hospitals and research institutions to primarily fund
research expenditures on a joint basis. Income received and expenditure incurred under such joint ventures is
accounted for by the method of proportional consolidation.
Tangible and intangible assets
Expenditure on equipment & other assets and leasehold improvements is charged in full against revenue in the
year it is incurred in accordance with accepted practice for cancer research organizations. The resale value of
research equipment is minimal and no significant income is generated there from.
The value of intangible assets is not recorded in the balance sheet. All research expenditure, including the cost of
patenting and licensing intellectual property, is charged in full against revenue in the year it is incurred.
Taxes
The Institute and the Fund are tax-exempt organizations and accordingly are not subject to income taxes.
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Ludwig Institute for Cancer Research
Withholding taxes on foreign dividends and interest have been provided for in accordance with the applicable
countries’ tax rates.
3 Current assets - investments
Investments, at fair value, held at December 31, 2005 and 2004 were as follows: -
USD CHF
Description 2005 2004 2005 2004
Invested cash and cash equivalents
- USD 35,782,346 38,228,632 47,157,554 43,469,777
- Non-USD currencies 19,971,338 3,374,204 26,320,226 3,836,807
Equity investments 597,232,018 573,166,217 787,092,077 651,747,305
Fixed income investments
- Government 160,825,613 133,310,879 211,952,075 151,587,801
- Other 10,239,657 60,886,360 13,494,844 69,233,880
Alternative investments 357,535,195 329,835,404 471,195,633 375,055,838
(limited partnerships)
Due from brokers 24,821 31,518,636 32,712 35,839,841
Net unrealized loss on (1,304,599) (108,005) (1,719,331) (122,812)
foreign currency contracts
Investments, at fair value 1,180,306,389 1,170,212,327 1,555,525,790 1,330,648,437
Investments, at cost 949,583,571 925,189,968 1,251,456,188 1,052,033,513
4 Collateral under securities loan agreement
By agreement, the custodian, acting on behalf of the Fund, may lend Fund securities to broker-dealers. The Fund
receives as compensation a portion of the interest earned on the investment of the cash received as collateral. The
Fund continues to earn dividends and interest on the securities loaned. The loans are secured by cash collateral at
least equal, at all times, to the market value of the securities loaned plus accrued dividends and interest, if any. If
the borrower defaults and the value of the collateral is inadequate, or if bankruptcy proceedings are commenced
with respect to the borrower of the security, the custodian will assume such risk and indemnify the Fund.
USD CHF
Description 2005 2004 2005 2004
Market value of securities loaned 88,426,368 56,107,801 116,537,110 63,800,181
Value of collateral 91,580,608 58,731,799 120,694,083 66,783,929
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Ludwig Institute for Cancer Research
5 Fixed assets - investments
USD CHF
Description 2005 2004 2005 2004
Universe Tankships, Inc.
Share capital 5,103,000 5,103,000 6,725,244 5,802,621
Percentage owned 100% 100% 100% 100%
Net assets at January 1 28,122,000 28,023,000 31,977,526 34,658,847
Dividends paid to the Institute 0 0 0 0
Net income for the year 744,000 99,000 921,072 125,285
Rounding / translation adjustment 0 0 5,143,904 (2,806,606)
Net investment at December 31 28,866,000 28,122,000 38,042,502 31,977,526
PIramed Ltd
Percentage owned 8% 8% 8% 8%
Net investment 756 845 996 960
XCellSyz Ltd
Percentage owned 1% 1% 1% 1%
Net investment 7 8 9 9
Lymphatix Ltd
Percentage owned 36% 0% 36% 0%
Net investment 4,297 0 5,663 0
Total net investments 28,871,060 28,122,853 38,049,170 31,978,495
Universe Tankships, Inc.’s primary business function is to oversee the management of its remaining investments
and to provide administrative services to related parties.
Universe Tankships, Inc. has been accounted for using the equity method.
All other assets were acquired as part of licensing arrangements and are valued at acquisition costs. In 2005, the
Institute acquired 36,430 shares of the company Lymphatix Ltd, a Finnish corporation, at a nominal value of EUR
0.10 each.
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Ludwig Institute for Cancer Research
6 Capital changes
Net worth
The share capital consists of 50 fully paid shares of nominal value CHF 1,000 each. The shareholders do not have
any interest in the assets or income of the Institute. Their sole power is to vote the shares in accordance with the
exclusively charitable and scientific purpose of the Institute.
USD Share Legal Endowments Cumulative Cumulative Total
capital reserve excess of translation net
income adjustment worth
Balance at January 1, 2005 33,722 6,744 572,000,000 632,362,005 12,495 1,204,414,966
Excess of income over 0 0 0 13,706,394 (7,239) 13,699,155
expenditure
Net increase in restricted funds 0 0 0 (249,208) 0 (249,208)
Balance at December 31, 2005 33,722 6,744 572,000,000 645,819,191 5,256 1,217,864,913
CHF Share Legal Endowments Cumulative Cumulative Total
capital reserve excess of translation net
income adjustment worth
Balance at January 1, 2005 50,000 10,000 773,352,000 820,548,288 (224,419,977) 1,369,540,311
Excess of income over 0 0 0 21,181,369 215,432,177 236,613,546
expenditure
Net increase in restricted funds 0 0 0 (1,129,658) 0 (1,129,658)
Balance at December 31, 2005 50,000 10,000 773,352,000 840,599,999 (8,987,800) 1,605,024,199
Included in the Current year movements is an increase of USD 425,766 (CHF 561,125), which is due to the
dissolution of a provision in respect of the Federated Pension Scheme, which was previously set up in accordance
with IAS19. This has been reversed to follow the provisions of the revision of FER16.
Endowments
Universe Tankships Inc. made the endowments to the Fund in the following years: -
Description Year Amount Amount
Initial Endowment 1990 USD 500,000,000 CHF 673,500,000
Second Endowment 1991 USD 24,000,000 CHF 36,588,000
Third Endowment 1992 USD 48,000,000 CHF 63,264,000
Total USD 572,000,000 CHF 773,352,000
Cumulative excess of income over expenditure
The Statutes of the Institute stipulate that the balance of income shall not be distributed to shareholders and
accordingly the available balance of income is carried forward.
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Ludwig Institute for Cancer Research
Changes in deferred income (restricted funds)
USD CHF
Description 2005 2004 2005 2004
Fund balances at January 1 4,432,136 3,916,761 5,039,865 4,844,173
Usage of funds (3,014,340) (3,755,840) (3,427,721) (4,645,223)
New funds 3,362,221 4,267,356 4,431,052 4,852,496
Exchange rate adjustments (98,672) 3,859 126,327 (11,581)
Fund balances at December 31 04,681,345 4,432,136 6,169,523 5,039,865
Net change of fund balances 249,208 515,375 1,129,658 195,692
In accordance with Swiss GAAP FER 21 as from January 1, 2003 all changes in restricted funds balances are
shown gross as part of the Consolidated Statement of Income and Expenditure (see Note 2, Accounting policies,
Research external funding).
7 Cash flow statement
Tangible fixed assets
During the years ended December 31, 2005 and December 31, 2004 the purchase of equipment & other assets and
expenditure on leasehold improvements, amounting to CHF 5,825,296 (USD 4,705,466) and CHF 6,220,395
(USD 4,915,338) respectively, was charged in full against revenue in the years in which it was incurred. Receipts
arising from the disposal of equipment & other assets amounting to CHF 121,983 (USD 98,533) and CHF 645
(USD 510) respectively were credited in full to revenue in the years in which the proceeds were received.
8 Forward currency contracts
The Institute enters into forward currency contracts in order to hedge its exposure to fluctuations in foreign
currency exchange rates in respect of anticipated expenditure in these currencies for periods of up to one year.
The Fund enters into forward contracts in order to hedge its exposure to changes in foreign currency rates on its
assets and liabilities denoted in foreign currencies. In 2005 and 2004 unrealized gains of CHF 2,141,695 (USD
1,625,081) and CHF 3,186,167 (USD 2,417,609) and unrealized losses of CHF 3,861,026
(USD 2,929,680) and CHF 3,328,507 (USD 2,525,614) respectively, arising from contracts open at year end are
included in the statement of income and expenditure.
The values of the forward foreign currency contracts held by the Institute and the Fund translated at the relevant
year-end exchange rates were as follows in units of thousand: -
USD CHF
Description 2005 2004 2005 2004
Forward currency sales 191,262 175,228 252,064 199,250
Forward currency purchases 192,567 175,336 253,784 199,374
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Ludwig Institute for Cancer Research
9 Lease commitments
USD CHF
Year 2005 2004 2005 2004
2005 0 4,562,700 0 5,188,241
2006 4,292,188 3,517,880 5,656,675 4,000,184
2007 3,379,284 3,218,399 4,453,564 3,659,646
2008 3,002,869 2,775,963 3,957,481 3,156,557
2009 2,621,678 2,587,610 3,455,112 2,942,379
2010 2,523,965 2,476,718 3,326,326 2,816,281
2011-2015 8,375,713 5,546,859 11,038,349 6,307,357
2016-2020 262,260 281,232 345,626 319,791
Lease commitments not recorded in
the balance sheet 24,457,957 24,967,361 32,233,133 28,390,436
10 Fire insurance values
USD CHF
Description 2005 2004 2005 2004
Equipment and other assets 80,534,065 78,078,418 106,135,844 88,782,969
Leasehold improvements 34,792,202 31,500,226 45,852,643 35,818,907
Total insurance values 115,326,267 109,578,644 151,988,487 124,601,876
11 Liabilities to pension funds
USD CHF
Description 2005 2004 2005 2004
Current liabilities 32,093 167,323 42,295 190,263
Institute-wide, the annual cost of the employer’s contributions in 2005 and 2004 amounted to CHF 5,782,791
(USD 4,671,075) and CHF 6,096,280 (USD 4,817,290) respectively.
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Ludwig Institute for Cancer Research
Listed below are all the pension schemes for which information is required under the early application of the
revision of FER 16, which will be effective as from January 1, 2006. All amounts are in units of thousand: -
Name / Surplus / Share of Share of Change of Contribu- Contribu- Contribu-
Country (Shortfall) Surplus / Surplus / Surplus / tions 2005 tions tions
31.12.05 (Shortfall) (Shortfall) (Shortfall) incl change 2005 2004
31.12.05 31.12.04 2005 surplus /
(shortfall)
USD USD USD USD USD USD USD
Federated
Pension (82) 0 0 0 256 256 288
Scheme
(UK)
Vita Collective
Insurance N/A 0 0 0 376 376 461
(CH)
Winterthur
Collective N/A 0 0 0 292 292 332
Insurance
(CH)
Name / Surplus / Share of Share of Change of Contribu- Contribu- Contribu-
Country (Shortfall) Surplus / Surplus / Surplus / tions 2005 tions tions
31.12.05 (Shortfall) (Shortfall) (Shortfall) incl change 2005 2004
31.12.05 31.12.04 2005 surplus /
(shortfall)
CHF CHF CHF CHF CHF CHF CHF
Federated
Pension (109) 0 0 0 316 316 365
Scheme
(UK)
Vita Collective
Insurance N/A 0 0 0 465 465 583
(CH)
Winterthur
Collective N/A 0 0 0 362 362 420
Insurance
(CH)
The Federated Pension Scheme as described above has been accounted for as a defined benefit scheme in
accordance with Swiss GAAP FER16 as from 2002. Employer contributions are fixed on an annual basis. It is the
employer’s responsibility to finance any potential shortfall of the scheme. However, there is no requirement to
provide shortfall financing at the current time.
The underlying actuarial assumptions, used in the calculation are based on current economic circumstances and
tax exemption status, are as follows: -
Description 2005 2004
Discount rate 4.90% 5.35%
Expected rate of return 7.00% 6.60%
Annual increase of future salaries 3.50% 3.60%
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Ludwig Institute for Cancer Research
An actuarial valuation is carried out triennially and in addition, valuations in accordance with IAS19 are carried
out annually.
Vita Collective Insurance discloses a cover ratio of approx 104%; detailed amounts however are not yet available.
The total surplus is attributed to the scheme and not to the employer.
The Winterthur Collective Insurance does not disclose any figures on surplus or shortfall. All risks (old age,
disability, death benefits) are insured with Winterthur Life, which also invests the respective assets independently.
As at December 31, 2005, the scheme does not have a shortfall and there is therefore no requirement to provide
shortfall financing.
Branches and offices with defined contribution schemes are located in Belgium, Brazil, Sweden and the United
States of America. The branches in Australia and the United Kingdom are registered employers with the local
university pension schemes, which set the level of contributions based on the advice of the schemes’ actuaries. In
view of the size of the schemes and the Institute’s limited participation in the management of the schemes, the
two university schemes are treated as defined contribution schemes. The contributions are calculated as a
percentage of the insured salary. No obligations or benefits exist versus these schemes.
12 Directors’ emoluments
The members of the Institute’s Board of Directors constitute all of the Board of Directors of the Fund.
Emoluments, consisting of (i) Directors’ Fees and (ii) Salary, pension and other benefits, were paid by (a) the
Institute and Ludwig Group Inc, a subsidiary company, and (b) the Fund to the members of the two respective
Boards as follows: -
USD CHF
Description 2005 2004 2005 2004
Directors’ Fees 304,621 303,216 377,120 383,720
Salary, pension and other benefits 1,416,041 1,357,996 1,753,059 1,718,543
Total emoluments 1,720,662 1,661,212 2,130,179 2,102,263
The Chairman of the two Boards, the Chief Executive Officer and the President of the Institute received Salary,
pension and other benefits but did not receive Directors’ Fees.
The remaining members of the two Boards received Directors’ Fees but did not receive Salary, pension and other
benefits.
The remuneration of the two Boards of Directors, the Chairman of the two Boards, the Chief Executive Officer
and the President of the Institute are subject to review by both the Institute Shareholders’ Compensation
Committee and the Institute Board Compensation Committee, which were established in 1998. Recommendations
made by the Shareholders’ Compensation Committee set the outside limits of compensation which the Boards of
Directors establish for the Chairman of the Boards, the Chief Executive Officer, the President of the Institute and
for the members of the Boards.
At December 31, 2005 and 2004, there were eleven members respectively of both the Board of Directors of the
Institute and the Fund.
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Ludwig Institute for Cancer Research
13 Value added tax
The Institute is registered for value added tax in Switzerland.
In September 2004, the Federal Tax Administration carried out an audit at the Institute’s Zurich office. In an
informal report, the Federal Tax Administration questioned the method used by the Institute in calculating the
reduction of the input tax for the years 2000 to 2004.
The report set out three different methods to calculate the input tax reduction with claims ranging for 2003 - the
year audited in detail - between CHF 889,937 (USD 782,637) and CHF 929,802 (USD 817,696).
In May 2005 the Federal Tax Administration revised their initial position and invoiced the Institute for a total
amount of CHF 1,739,606 (USD 1,319,983) with amounts ranging between CHF 301,866 (USD 229,051) and
CHF 374,404 (USD 284,091) for the years 2000 to 2004.
The Institute’s management continues to be not in agreement with these calculations and its tax advisors wrote to
the Federal Tax Administration in June 2005 setting out again the Institute’s position. The Federal Tax
Administration has not, as yet, responded to this letter.
In the opinion of management, based on professional advice received, the Institute expects a further substantial
reduction in the claim by the Federal Tax Administration. However, taking account of the developments that took
place in 2005, for the sake of prudence, a provision of CHF 1,205,000 (USD 914,333) has been included in the
financial statements 2005, whereas no accrual was made in 2004.
14 Related party transactions
Effective January 1, 1996, the Institute and the Fund entered into administrative service agreements with The
Ludwig Group Inc. (LGI), a wholly owned subsidiary of UTI.
Fees paid by the Institute and the Fund under the service agreements including occupancy related costs amounted
to CHF 3.8 Mio (USD 3.1 Mio) in 2005 and CHF 3.7 Mio (USD 2.9 Mio) in 2004.
Payables in favor of LGI by the Institute and the Fund as at December 31, 2005 and December 31, 2004
amounted to CHF 996,000 (USD 756,000) and CHF 882,000 (USD 776,000) respectively.
Future minimum rental payments in favor of LGI as at December 31, 2005 and December 31, 2004 amounted to
CHF 3.6 Mio (USD 2.7 Mio) and CHF 3.5 Mio (USD 3.1 Mio) respectively.
15 Expenditure analysis
For fiscal reporting purposes, expenditure is analyzed between programme service expenditure, management and
general expenditure and fundraising expenditure. For the year 2004 (the latest year where analysis data is
currently available), CHF 112,116,273 (USD 88,594,447) were reported as programme service expenditure,
CHF 21,502,286 (USD 16,991,139) as management and general expenditure, and CHF 1,289,781
(USD 1,019,187) as fundraising expenditure on a consolidated basis.
In 2003 CHF 110,406,110 (USD 80,424,031) were reported as programme service expenditure, CHF 20,465,577
(USD 14,907,909) as management and general expenditure, and CHF 1,562,175 (USD 1,137,948) as fundraising
expenditure on a consolidated basis.
16 Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
- 39 -
Ludwig Institute for Cancer Research
Performance Report
Purposes of the organization
The purpose of the Ludwig Institute for Cancer Research is to originate and conduct incisive long-range research programs
to be carried out on a continuing basis in conjunction with hospitals in established medical centres, directed to the ultimate
goal of controlling and eradicating cancer.
The Institute is a Swiss not-for-profit organization with around 900 scientists, clinicians, students and support staff in
various countries who are focused on multiple aspects of basic and clinical cancer research, including cancer genetics and
genomics, tumor immunology, and cell growth and differentiation.
The Institute’s research activities are organized through 9 Branches located in 7 different countries.
Each Branch leases space, has its own Ludwig Institute staff and functions in close association with a local university and
a not-for-profit hospital. A number of affiliated individual investigators and laboratories complement the Institute's Branch
network and extend its global reach.
The Institute does not make grants and contributions to others. Instead, it applies its resources to its own cancer research
activities.
The Institute continued to be very successful in attracting external funding to support its core research programs. In 2005,
the Institute received CHF 19.4 million (USD 15.4 million) from industrial, philanthropic and government sources. In
addition, external funding for fellowships and studentships amounting to CHF 14.5 million (USD 11.5 million) was taken
to income in 2005. The total amount received of CHF 33.9 million (USD 26.9 million) was 11.7 % (CHF) and 10.7 %
(USD) higher than the 2004 amount received of CHF 30.3 million (USD 24.3 million), primarily due to higher
government and fellowship grants. Research external funding income represented 27.1% of the total medical research
related expenditure during 2005.
The Institute is committed to translating its basic research discoveries into therapeutic practices and is an active sponsor of
its own clinical trials.
Managing bodies and Senior staff
The Statutes and By-laws of the Institute determine the responsibilities and the authority of the following organs of the
company:
• the Board of Directors
• the Management, comprising the Executive Officers, and
• the Branch Directors.
The Board is elected at the General Meeting of Shareholders held each year in June for a one-year term of office. The
members of the Institute Board of Directors are automatically members of the Board of Directors of LICR Fund Inc.
The individuals who served as members of the Board of Directors of both the Institute and the Fund in 2005 were as
follows: - Mr R Palmer Baker Jnr. (Chairman); Mr Alfred Berger; Mr Georges-André Cuendet; Mr Olivier Dunant; Mr
John D. Gordan III; Dr Adolf E. Kammerer; Mr Pierre Languetin; Mr Edward A. McDermott Jnr.; Dr Lloyd J. Old; Sir
Derek Roberts and Prof Jane Royston.
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Ludwig Institute for Cancer Research
The Executive Officers of the Institute comprised its management and consisted of the President; the Institute Director; the
Associate Directors; the Chief Financial Officer and the Secretary to the Board of Directors. These posts were held as of
December 31, 2005 by the following individuals: -
President Mr Edward A. McDermott Jnr.
Institute Director Dr Lloyd J. Old
Associate Director of Clinical Investigations Dr George D. Demetri
Associate Director of Intellectual Property Dr Jonathan Skipper
and Licensing
Associate Director of Laboratory Investigations Dr Richard Kolodner
Associate Director of Programs Dr Andrew Simpson
Chief Financial Officer and Secretary to the Board Mr Richard D. J. Walker
The Executive Officers were supported by the Directors of the following Administration Offices: -
Office of Academic Review Dr Ellen Puré
Office of Clinical Trials Management Dr Eric Hoffman
Office of Communications Dr Sarah White
Office of Information Technology Dr Victor Jongeneel
Office of Intellectual Property Dr Jonathan Skipper
The Executive Officers and Directors of the Offices are all employed on open and rolling contracts with varying notice
periods.
The Institute’s By-Laws were revised in December 2005.
The Institute has a Scientific Advisory Committee that provides advice to the President and the Executive Officers on
scientific matters as well as on the scientific staff review process. The secretary to the Scientific Advisory Committee in
2005 was Dr. A. Munro Neville.
The Institute effects its research activities primarily through its Branches. These are long-term arrangements and all of the
Branches were founded between 1972 and 1991. Branches are managed by a Branch Director, who is responsible for the
Branches’ scientific program and for all Branch administrative arrangements.
The Branch Directors who were in post during 2005 were: -
Brussels Branch Dr Thierry Boon
Lausanne Branch Dr Jean-Charles Cerottini
London Imperial College Branch Dr Paul J. Farrell
(to August 2005)
London University College Branch Dr. Xin Lu
Melbourne Branch Dr Antony W. Burgess
New York Branch Dr Lloyd J. Old
San Diego Branch Dr Webster K. Cavenee
Sao Paulo Branch Dr Ricardo R. Brentani
Stockholm Branch Dr Ralf F. Pettersson
Uppsala Branch Dr Carl-Henrik Heldin
All Branch Directors hold Member appointments with the Ludwig Institute and as such have five-year rolling contracts.
Various Executive Officers and Branch Directors hold academic and senior executive positions within the host university
and hospital organizations and other scientific institutions with which the Ludwig Institute is associated.
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Ludwig Institute for Cancer Research
Results of work on Institute research programs in 2005
Scientific results and publications
During the past year, an LICR-sponsored Phase I clinical trial of a monoclonal antibody, mAb 806, was initiated to
examine its tumor targeting ability and safety profile. The mAb 806 antibody targets the epidermal growth factor receptor
(EGFR), which promotes cancer cell growth and is linked to over 50% of all cancers of epithelial cell origin. A
pharmaceutical company has recently brought to market an antibody therapy (cetuximab) that effectively benefits patients
by targeting EGFR, but this therapy has side-effects from targeting normal liver and skin cells. LICR has shown, in
preclinical investigation, that mAb 806 does not target normal liver and skin cells and thus would not be expected to
induce side-effects. Additionally, several small molecule inhibitors of EGFR have been developed or are in clinical testing
from other biopharma firms. However, resistance to these inhibitors remains a major clinical problem limiting their
efficacy.
Three publications from LICR investigators were featured on the front covers of prestigious science journals during 2005.
A micro array analysis identifying early changes in the intestine and esophagus, which could be used to diagnose Barrett's
disease (a risk factor for adenocarcinoma of the esophagus), was featured on the front cover of the American Association
for Cancer Research's journal, Cancer Research. Two publications were featured on the front covers of journals from the
Nature group, one characterizing the details behind the regulation of neural stem cell differentiation, which is likely to
have parallels in cancer stem cell differentiation, was featured in Nature Neuroscience, while the other, discovering a new
mechanism for segregating chromosomes, was featured in Nature Cell Biology. Additionally, findings from the discovery
of the primary mutation causing polycythemia vera, a myeloproliferative disease characterized by the excessive production
of red blood cells, were featured on the front cover of The American Society of Hematology Education Program Book,
2005.
The Ludwig Institute for Cancer Research is committed to prompt and active dissemination of its research results. In the
year 2005, LICR investigators published 366 scientific papers in recognized peer-reviewed journals.
The publication record by Branch is as follows: -
Brussels 37
Lausanne 46
London Imperial College 3
London University College 35
Melbourne 56
New York 41
San Diego 57
Sao Paulo 33
Stockholm 17
Uppsala 41
Total 366
Clinical Trials
As part of its program of clinical discovery in 2005, 33 trials were open to patient accrual and a total of 150 patients were
enrolled. Ethics Committee approval was received for ten trials. The Institute had 17 active Investigational New Drug
(IND) applications (USA) and two Investigational Medicinal Product Dossiers (EU).
Patents
The Institute and co-owners filed approximately 45 new priority, continuation, continuation-in-part or divisional patent
applications during 2005. On a cumulative basis, about 1,000 different patent applications and a further 2,500 regional and
national patent filings have been made since 1990.
About 50 patents including national patents were issued to the Institute and co-owners during 2005. On a cumulative basis,
more than 1,100 patents have been issued to the Institute and co-owners. About ¾ of these patents are currently considered
active, i.e. the patents have not expired and will continue to be maintained by the Institute at the next renewal.
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Ludwig Institute for Cancer Research
The analysis of active patents by branch is as follows:
Priority Total including national patents
2005 2004 2005 2004
Brussels 34 34 451 418
Lausanne 4 4 18 18
London Imperial College 1 1 2 1
London University College 5 5 60 56
Melbourne 11 11 67 52
New York 23 20 108 88
San Diego 0 0 0 0
Sao Paulo 2 1 12 10
Stockholm 1 2 25 8
Uppsala 4 4 48 46
Affiliates/inventors from 18 17 138 110
several Branches
Total 103 99 929 807
Material Transfer Agreements
The Institute entered into 571 material transfer agreements during 2005. These were mainly with academic institutions
(549 agreements) whereby the Institute supplied reagents free of charge to the academic community while 22 material
transfer agreements were entered into with commercial organizations. One agreement may cover several reagents.
The material originated from the following locations: -
2005 2004
Brussels 28 70
Lausanne 17 34
London Imperial College 5 11
London University College 74 67
Melbourne 59 56
New York 23 16
San Diego 128 32
Sao Paulo 4 3
Stockholm 3 1
Uppsala 122 161
Affiliates/inventors from several Branches 108 121
Total 571 572
Licensing / Royalties
In accordance with the objective of making scientific discoveries available to the general public, the Institute enters into
agreements with commercial organizations having the substantial financial and management resources necessary and/or
which may own key complementary technologies necessary to develop Institute discoveries for therapeutic purposes.
The Institute was party to 121 license, sublicense, option and evaluation agreements with commercial organizations at the
beginning of 2005. A further 15 agreements were signed during the year while 17 agreements expired or were terminated
with the result that at year end the portfolio comprised 119 agreements.
A large number of these agreements are with companies selling Institute reagents for laboratory research purposes or with
companies using Institute developed reagents for in-house research purposes only. A total of 31 of these agreements relate
to the development of therapeutic products. Two agreements relate to a therapeutic product presently on the market, GM-
CSF (granulocyte macrophage colony stimulating factor), while the rest relate to products at various stages of development
from pre-clinical testing to Phases I, II and III clinical trials of the products.
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Ludwig Institute for Cancer Research
GM-CSF is a broad stimulator of haematologic progenitor cells for patients with low white blood cell counts and has been
licensed to Schering-Plough Corp. and Immunex, Inc. and subsequently to Schering AG by Research Corporation
Technologies Inc. (RCT), Tucson, Arizona under an Invention Administration Agreement with the Institute. GM-CSF was
co-invented with The Walter and Eliza Hall Institute for Medical Research, Melbourne.
Sales of therapeutic products based on GM-CSF were in the order of USD 75 million for 2004. These products are
currently sold by Schering-Plough Corporation under the trademark Leucomax and by Schering AG through its wholly
owned subsidiary company Berlex, Inc. under the trademark Leukine.
Sales of other products licensed from the Institute for research and diagnostic purposes were in excess of USD 4 million.
The gross income to the Institute from license fees and royalty income totaled USD 7.6 million for 2005 and USD 3.9
million after co-owner and inventor sharing.
The Institute is also working to facilitate the start-up of new companies using Institute-owned technology as appropriate.
Human Resources
An important aspect of the Institute’s developing programs is the training of outstanding young scientists who will in time
join an emerging new generation of cancer investigators. During the year, 29 PhD students started and 42 completed their
postgraduate training with the Ludwig Institute.
At December 31, 2005, the Institute was acting as sponsor to 133 postdoctoral fellows and 142 PhD students.
The quality of the Institute's science continued to be internationally recognized. In the last year, the following distinctions
and awards were received: -
• Dr. Thomas Perlmann (Stockholm Branch) was elected to the 50-member Nobel Assembly responsible for electing
the Nobel Prize laureates in Physiology or Medicine;
• Dr. Benoît Van den Eynde (Brussels Branch) was awarded the honor of presenting a cycle of conferences for the
Francqui Chair, Louvain University, Brussels;
• Dr. Antony Burgess (Melbourne Branch) was awarded the Leach Lecture Medal;
• Dr. Serhiy Souchelnytskyi (Uppsala Branch) was awarded a Roche Award by the Human Proteome Organization
(HuPO) Conference.
Formal academic review to assess the quality and impact of the research performed by LICR staff members was conducted
in 2005 by the Scientific Advisory Committee and Scientific Directorate.
Three staff members underwent external review for Associate Member rank and were promoted:-
Dr. Stefan Constantinescu (Brussels Branch), Dr. Weisan Chen (Melbourne Branch) and Dr. Ian Davis (Melbourne
Branch).
One staff member, Dr. Andrew Clayton (Melbourne Branch), underwent review for Assistant Member rank and was
appointed.
One staff member, Dr. Karen Arden (San Diego Branch), underwent review for Senior Investigator rank and was
appointed.
One staff member, Dr. Brian Stevenson (Office of Information Technology, Lausanne), underwent review for Associate
Investigator rank and was appointed.
Three staff members underwent review for Assistant Investigator rank and were appointed: -
Dr. Christian Iseli (Office of Information Technology, Lausanne), Dr. Zhanqi Liu (Melbourne Branch) and Dr. Carina
Hellberg (Uppsala Branch).
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Ludwig Institute for Cancer Research
Proposal to carry forward excess of income over expenditure
The Statutory and Consolidated Financial Statements of the Ludwig Institute for Cancer Research as
of December 31, 2005, together with the Reports of the Statutory Auditors and the Group Auditors,
KPMG Fides Peat, dated April 7, 2006, are hereby submitted to the General Meeting of Shareholders.
The balance sheet of the Consolidated Financial Statements shows total assets of CHF 1,754,587,247
and the statement of income and expenditure shows an excess of income over expenditure for the
fiscal year of CHF 21,181,369.
The balance sheet of the Statutory Financial Statements shows total assets of CHF 42,794,371 and the
statement of income and expenditure shows an excess of income over expenditure for the fiscal year
of CHF 4,522,253.
In accordance with Article 8 of the Statutes, the Board of Directors proposes that the Shareholders of
the Institute authorize the carrying forward of the accumulated available excess of income over
expenditure as at December 31, 2005 in the amount of CHF 15,621,240. In this regard, it is noted that
according to Article 8 of the Statutes of the Institute, no distribution may be made to the Shareholders.
Ludwig Institute for Cancer Research
May 8, 2006
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